Manchester government warned to plan for Cadillac tax on healthcare

MANCHESTER — The Affordable Care Act will cost the city nearly $200,000 in the current fiscal year, and could result in a $1.2 million levy in 2018, when a tax for so-called "Cadillac plans" is set to kick in, according to a report presented Tuesday.

The report by Workplace Benefit Solutions, which oversees the city's benefit plans, was conducted to assess how the health care law, commonly known as Obamacare, would affect city finances.

The most immediate fiscal impact of the health care law is a $196,800 "transitional reinsurance fee" in 2014, the current fiscal year; it's not known what the charge will be in subsequent years. There will also be a $1 per-member charge that will total $3,120 in 2014 (and double this amount the next year). These costs were factored into the current year's budget, according to the report.

The "Cadillac tax," an excise tax on the value of generous health plans, would go into effect in 2018. Tom DeLacey, a principal consultant with Workplace Benefit Solutions, told the aldermen that projecting ahead with the city's current health plans, the city could face a $1.2 million tax.

The health care plans offered by the city are considered generous in terms of the coverage provided and low premiums borne by employees.

Under the "Cadillac tax," plans that have a value over $10,200 for single coverage and $27,500 for family, would be taxed at 40 percent of the dollar amount above those limits.

DeLacey said the pending Cadillac tax should be a subject in contract negotiations with city and school district employees.

"These are costs that will have to be shared by the employee and employers," he told the committee. "I would think everyone would want to mitigate the impact of that cost, and you'll want to do that sooner than later."

DeLacey said that between the city and the school district, the Cadillac tax could cost the city $3 million in 2018.

The consultant was asked why the government would tax more generous health plans. "In my opinion it was to find dollars (for the program)," he said. "Under reconciliation, this had to be revenue-neutral; for every dollar spent there had to be revenue."